Litigation

What is a Structured Settlement?

By David Austin and Barry Goldberg

Here's what Wikipedia says:  (I'm going to simplify the definition)

A structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada and the United States during the 1970s as an alternative to lump sum settlements. Structured settlements are now part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Although some uniformity exists, each of these countries has its own definitions, rules and standards for structured settlements. Structured settlements may include income tax and spendthrift requirements as well as benefits. Structured settlement payments are sometimes called “periodic payments.” A structured settlement incorporated into a trial judgment is called a “periodic payment judgment."

When you settle a personal injury case you agree to receive a certain amount of money and you then withdraw your case.  You can receive that money in either a lump sum, which means all at once, or you can agree to receive payments over time.  When you receive the payments over time you have a structured settlement.

For example, some people will take a large portion of their settlement now (to pay off bills and their attorneys) and then elect to receive the "rest" of the settlement monthly, quarterly, yearly or even on certain future dates.

So by receiving the money over time, you are "structuring" the settlement and often building some future security.

Full post as published by Cash Flow Solutions Blog on March 02, 2008 (boomark / email).